suffered. These false claims were made possible by the failure of certain agents of the carriers to properly inspect shipments before delivery. It developed that the shippers in question were bribing these agents of the carriers to discriminate in their favor by thus failing properly to inspect shipments and, further, by favoring these particular shippers of eggs with expedited service. Upon the above facts, William A. Scarborough, Charles T. Adams, De Winter & Co., John C. De Winter, E. M. Garrison, H. D. Wheeler, George Miller, R. B. Shimer & Co., H. C. Shimer, Adolph Fortgang, Willard P. Brown, and W. H. Sanford were indicted for obtaining transportation at less than the lawful rate by means of false claims for damage and for inducing and also for attempting to induce agents of carriers to discriminate unjustly in their favor. All of these defendants except the last one above named have pleaded guilty. In the case of H. D. Wheeler and George Miller sentence has been suspended. Fines aggregating $30,000 have been assessed against the other defendants. F. E. Harris was also indicted in the southern district of California for making false claims, and upon pleading guilty was fined $500. These cases involved an offense by shippers for which the act provided no penalties prior to 1910. The offense of securing allowances by false claims for damage so clearly arises from a fraudulent intent and results in such substantial losses to the carriers, as well as in discrimination against other shippers, that it will be vigorously prosecuted whenever detected.

Abuses of the transit privileges accorded by carriers were formerly explained by the failure of shippers to understand the strict requirements of the law. So much publicity, however, has been given to the proper limits within which these privileges may be used that ignorance can scarcely be urged in the future as an excuse for failing to conform strictly to the tariff rules and regulations governing these privileges. In January the Michigan Central Railroad Co. pleaded guilty of granting and Chapin & Co. of receiving concession by the device of substitution in transit. Each defendant was fined $5,000. In November the Roberts & Hamner Grain Co., of Memphis, Tenn., was indicted for substitution in transit by means of false billing of grain. Similar indictments have just been returned against the Lumber Products Co. and G. H. Evans Lumber Co. for substitution of lumber in transit at Chattanooga by means of false billing. Further prosecutions under the Elkins Act and under section 10 of the act to regulate commerce for abuses of transit privileges will be undertaken until the tariff provisions are properly enforced and these shipping privileges are administered and enjoyed under such conditions as not to involve unjust discrimination in favor of dishonest and against law respecting shippers and carriers.

Still another case in which abuse of transit privileges has been attempted and held to be unlawful is the so-called Imperial Rice case. Investigation showed that Leo B. Hahn, A. M. Waugh, and T. F. Ryan, trading under the name of the Imperial Rice Co., would make a carload shipment of rice from a point in Texas to Houston under a rate on file with the State commission of Texas, there unload the car, and later reload it with entirely different rice and ship this load to a point in another State at the balance of the through rate that would have applied on the original shipment had it been shipped through. This was done under a tariff permitting stoppage at Houston to complete loading. This case would be similar to the familiar substitution in transit cases where a local rate from a transit point has been defeated by improperly applying the balance of a through rate from such point, were it not for the fact that in this instance the rate from Houston, the transit or reshipping point, was the same as the through rate from the point of origin of the original shipment. Under these circumstances it could not be alleged that the interstate rate from Houston was defeated by charging from Houston only the balance of the through rate applying from points of origin since an amount equal to the local rate from Houston was in fact charged on the interstate shipment, and the transportation from point of origin to Houston was secured free of charge. The indictment therefore alleged a concession of the State rate from point of origin to Houston in connection with the interstate shipment from Houston. Two of the defendants, Leo B. Hahn and T. F. Ryan, pleaded guilty, and a fine of $1,000 was assessed against each.

Failure on the part of several carriers to collect from certain shippers the demurrage charges lawfully filed by them has been the subject of an extended investigation. This is a kind of discrimination which is difficult of detection because it is not disclosed by the shipping papers on which the regular transportation charges are recorded. It developed, however, that such charges were not being made by the New York Central & Hudson River Railroad Co. and the Erie Railroad Co. at Buffalo and by the Michigan Central Railroad Co. at Detroit. Indictments were brought against these carriers for granting concessions and failure to observe their lawfully published charges. The New York Central & Hudson River pleaded guilty to three distinct indictments and paid fines aggregating $30,000. The Erie Railroad Co. pleaded nolo contendere and paid a fine of $20,000. The case against the Michigan Central Railroad Co. is still pending. Other instances of this practice are now the subject of investigation.

In Delaware, Lackawanna & Western Railroad Co. v. United States (not yet reported) the Supreme Court has just handed down a decision further defining the operation of the commodities clause.

This is the first construction of the clause by the Supreme Court arising out of a criminal prosecution. Over a year ago indictments were returned against the Delaware, Lackawanna & Western Railroad Co. and the Delaware & Hudson Co. for violating the commodities clause. It appeared that both of these common carriers were transporting hay owned by them from points in New York State for use at mines owned by them in Pennsylvania. It was contended by the defendants that the commodities clause was designed only to prevent transportation by a common carrier of commodities in which it had an interest when such commodities were to be marketed in competition with other shippers and that the clause was not intended to prevent transportation by a common carrier of a commodity in which it had an interest when such commodity was to be consumed in the operation of mines which it owned. It was also contended that since the commodity in question was sold to the carrier subject to its inspection and acceptance or refusal at destination, it did not, therefore, acquire an interest in the commodity until the transportation had been completed. In the case against the Delaware, Lackawanna & Western Railroad Co., a trial by jury was had, verdict of guilty rendered, and a penalty of $2,000 imposed by the district court. Appeal was taken and the Supreme Court sustained the decision of the district court. The case against the Delaware & Hudson Co. is still pending.

The year's work has been made significant because of the variety of cases in which the courts have shown a disposition to so construe the Elkins Act as to make rebating and the granting of concessions punishable, however ingenious may have been the device employed, to defeat the published rates. The more important of these cases are summarized below.

Investigation disclosed the fact that in the State of Colorado it was an established practice for certain carriers to issue free passes good only within the State for the purpose of influencing the routing of interstate shipments of freight. No violations of the antipass provisions of the act to regulate commerce were involved, since the passes applied only between points within Colorado. Such passes, however, were things of value to shippers, and when granted in connection with interstate shipments they amounted to concessions or rebates from the lawful rates. On this theory indictments were returned against the Denver & Rio Grande Railroad Co. and the Colorado & Southern Railway Co. for granting and against the Colorado Fuel & Iron Co., the Colorado Portland Cement Co., the Great Western Sugar Co., the United States Portland Cement Co., and the VictorAmerican Fuel Co. for receiving rebates and concessions. Upon plea by each of these defendants fines aggregating $7,000 were assessed. As a direct result the legislature of Colorado has enacted laws

restricting the issuance of free passes between points in that State within proper limits. This case and the Imperial Rice case described above establish the proposition that concessions as to State transportation, either freight or passenger, are unlawful if allowed in connection with interstate shipments.

Another indirect method of granting rebates and concessions which has been held to be within the prohibition of the Elkins Act is the practice which recent investigation shows to be not uncommon, by which certain carriers make leases of land, warehouses, etc., to interstate shippers at less than a fair rental value, or sublet such properties to shippers at less than the rental paid by the carriers themselves. In United States v. Union Stock Yard & Transit Co. (226 U. S., 286) the Supreme Court held that it amounted to a rebate in violation of the Elkins Act for an interstate carrier to pay part of the cost of a warehouse of a large interstate shipper who agreed to handle only goods transported by it. In Cleveland, Cincinnati, Chicago & St. Louis Railway Co. v. Hirsch (204 Fed., 849) the Circuit Court of Appeals of the Sixth Circuit held that a lease by a carrier to an interstate shipper at less than a fair rental was void because it amounted to a concession or rebate in violation of the Elkins Act. The Ore Dock cases, which were investigated by this division and concluded a year ago and in which total fines amounting to $123,000 were imposed, definitely settled the fact that carriers may not lease their terminal facilities to one set of shippers in a way that would discriminate against other shippers. The cases above cited go a step further by applying this doctrine not merely to the terminal facilities of a carrier but to any property owned by it, including real estate which constitutes no part of its transportation facilities. Upon this theory an indictment has been secured against the Lehigh Valley Railroad Co. for granting a concession by leasing certain lands at Buffalo for a coal yard to the Yates-Lehigh Coal Co. at less than a fair rental. Similarly, an indictment has just been returned against the Wichita Falls & Northwestern Railroad Co. for granting a concession by subletting certain land to an interstate shipper at a lower rental than the carrier was itself paying to the original lessor.

Another indirect device for granting a rebate for which indictment has been secured during the year is that resorted to by the Vandalia Railroad Co. in favor of the Lumaghi Coal Co. The Vandalia Mineral Co. is a corporation formed by interests controlling the Vandalia Railroad Co. for the purpose of holding coal-mining lands which the Vandalia Railroad Co. under its charter was not permitted to own. The Vandalia Improvement Co. is a holding company also controlled by the interests controlling the Vandalia Railroad Co. When the Vandalia Mineral Co. was organized the Vandalia Improvement Co. bought all of its stock with money furnished by the Vandalia

Railroad Co. Investigation showed that the Vandalia Mineral Co. loaned $260,000 to the Lumaghi Coal Co. to buy coal-mining properties located on the line of the Vandalia Railroad Co. This loan was made at 2 per cent interest on condition that the Lumaghi Coal Co. would ship all of its coal over the Vandalia Railroad. It further developed that the Vandalia Mineral Co. had borrowed this money from a bank at 4 per cent interest on notes which had been indorsed by the Vandalia Railroad Co. It was at once evident that the whole transaction was a device by which the railroad company was to grant a rebate amounting to 2 per cent interest on the amount of the loan in consideration of the routing of interstate shipments. Accordingly an indictment was secured against the Vandalia Railroad Co. for granting rebates.

Still another case in which carriers connived with a shipper for the purpose of defeating the published rates by roundabout methods was presented to a Federal grand jury in the eastern district of Illinois. The O'Gara Coal Co., a New York corporation, with its principal office in Chicago, had a contract for supplying fuel coal to the Grand Trunk Railway Co. of Canada. This coal was shipped from the mines in southern Illinois via the Cleveland, Cincinnati, Chicago & St. Louis and Chicago, Indiana & Southern to South Bend, Ind., where it was turned over to the Grand Trunk Western Railway Co. All of the shipments were billed by the O'Gara Coal Co. to Battle Creek, Mich., a point on the Grand Trunk Western. As a fact, however, the contract of the O'Gara Coal Co. with the Grand Trunk Railway Co. provided for delivery of the coal at South Bend, Ind., the junction point between the Chicago, Indiana & Southern Railway and the Grand Trunk Western. By the arrangement with the Big Four the O'Gara Coal Co. prepaid to this carrier the freight charges to South Bend on the basis of unpublished divisions of the through rates to Battle Creek. These divisions were less than the local rates to South Bend which should have been applied. In this manner the O'Gara Coal Co. secured concessions on all of the coal shipped. The tariffs of the Cleveland, Cincinnati, Chicago & St. Louis expressly prohibited partial prepayment of freight charges when through rates were in effect. In order to make possible the practice of the O'Gara Coal Co. the Cleveland, Cincinnati, Chicago & St. Louis and the Chicago, Indiana & Southern Railway Co. ignored this tariff provision. Responsibility was also brought home to the Grand Trunk Railway Co. by the fact that the waybilling and transfer slips advised this carrier that the destination billed was different from the destination of actual delivery. Upon the above facts indictments were returned against the O'Gara Coal Co. for receiving concessions, against the Cleveland, Cincinnati, Chicago & St. Louis and the Chicago, Indiana & Southern for granting concessions, against the Cleve